Panama’s Multinational Future

The Panama Trade and Investment Agency (PROVINEX) hails itself as the “Ultimate Destination for Multinationals investing in Latin America.”  For many developing economies, attracting foreign investment has been the primary goal.  According to figures released by PROVINEX, more than 140 multinationals have invested in the Latin American nation since 2007.  It’s top three investors being the EU, the United States and China (PRC) respectively.  The PRC’s influence continues to grow in the region, demonstrated by its increasing investment and willingness to work with fragile republics and tenuous political regimes in the developing world. Panama was recently granted Most Favored Nation status by the PRC during a recent visit by President Xi Jinping.

Increasingly, developing nations like Panama have courted large multinationals in an effort to generate revenue in the country.  The investment model has become a consistent theme for many emerging economies seeking to steer clear of World Bank and International Monetary Fund (IMF) loans that often include restricting claw back stipulations and high interest rates.  China along with its Belt and Road Initiative has quickly become the partner of choice, in a time when the US and EU states continue to pursue protectionist policies.

Even with investment from international conglomerates and multinationals, there remains a pressing need for these developing nations to create industries to compete in the world market.  While on the surface enticing large conglomerates is a quick way to make money, it does not provide for long term stability in the way in which a domestically sourced company might generate revenue.  According to 2006 Working Paper out of Rensselaer Polytechnic University authored by, Rodriguez et. al., many nations that open their doors to multinationals face political diversion, corruption and lapses in corporate responsibility.  These often weigh the hardest on local citizens and national politics that gradually begin to bend to the will of corporations with budgets three times as large the national GDP.

Nations like Panama will have to begin a process of intentional domestic growth to counterbalance it’s increasing relationships with multinational corporations and investor states like China and the United States.  This will mean more government support for local actors, farmers and entrepreneurs to ensure domestic growth continues beyond foreign investment.

 

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